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Bond Valuation

EBITA/WACC/annual rate of return

You are employed by Wal-Mart Stores, a Fortune 500 firm. You are on the corporate staff as an assistant to the CFO. This is a position with high visibility and the opportunity for rapid advancement, providing you make the right decisions. Your boss has asked you to estimate the weighted average cost of capital for the company.

Bond Valuation of Maturity for Cash Flows

IBM 8% due in 5 years Assume $1,000 Par or face amount Assume exactly 5 years to maturity Cash Flows: 0 $0 1 $40 2 $40 3 $40 4 $40 5 $40 6 $40 7 $40 8 $40 9 $40 10 $1,040

Yield to Maturity: Compute price of zero coupon bonds

a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why? The following

Earning a return; price of bond; estimated per-share price

1) As an investment analyst, you are typing to determine the probability of different returns on Omega Corporation's common stock. As a first step you will determine Omega's required rate of return. The 10-year Treasury bond rate is 4%. The market risk premium is 5% and Omega's beta is 1.4. You have already completed calculation

finance questions

Chapter 6 43.) Present and Future Values. The present value of the following cash flow stream is $6,550 when discounted at 10 percent annually. What is the value of the missing cash flow? Year Cash Flow 1 $1,700 2 ? 3 $2,100 4 $2,800 Chapter 7 9.) Calculating Real Rates of Return. If treasury bill

Bonds and Their Valuation; Features of Preferred Stock

1. A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT: a. The bond's current yield is less than 8%. b. If the yield to maturity remains at 8%, then the bond's price will decline over the next year. c. The bond's coupon rate is less t

After-Tax Cost of Financing

.Drywall Systems, Inc., is presently in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the company that different maturities will carry different coupon rates and sell at different prices. Drywall Systems must choose among several alternatives. In each case, the bo

ADJUSTING AND RECLASSIFYING ENTIRES

1. Office supplies have a balance of $2,400. An inventory at 12/31 shows $1,700 of supplies on hand. 2. There are two insurance accounts in the trial balance, prepaid insurance-$9,200 and Insurance Expense $2,800. Unexpired insurance at the statement date is $3,000. 3. All rent receipts ($25,000) were credited to rent income

Long, Short and Cross Hedges

See the attached file. SQ 9-9. Define and explain the use of the following: (a) long hedge; (b) short hedge; and (c) cross hedge. SQ 9-10. Which type of hedge named above works best in an environment of rising interest rates? Of falling interest rates? Illustrate both cases using a payoff diagram. SQ 9-11. What is the ba

Bond price changes; holding period yield; bank discount rate

Suppose a 10-year bond is issued with an annual coupon rate of 8 percent when the market rate of interest is also 8 percent. If the market rate rises to 9 percent, what happens to the price of this bond? What happens to the bond's price if the market rate falls to 6 percent? Explain why. An investor is interested in purchasin

Bond Payout Schedule

You are given two bonds (Bond A & Bond B) which have different payment schedule. Based on the following information, you wish to figure out which bond has a greater interest rate risk. (You need to calculate duration and volatility of bonds) o Bond A: 2 year discounted bond with face value of $1000. o Bond B: 2 year coupon

Demand, Supply, Price, Business Cycle, Interest Rates and Yield

1. When the demand for bonds _________ or the supply of bonds _________, interest rate rise. A. decreases; increases B. decreases; decreases C. increases; decreases D. increases; increases 2. When the price of a bond is _________ the equilibrium price, there is an excess demand for bonds and the price wil

Calculate the Value of a Bond

Please help with the following problem. Benson Incorporated has bonds with the following features: Par value of $1,000, maturity of 12 years, and a coupon rate of 8%. The yield to maturity is 10%. Please determine if the bond sells for a premium, par, or discount and explain your answer. Calculate the value of the bond if

Describing the Features of the Bond

Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March and September. The bonds are investment grade and sell at par. The bonds are callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus 0.50 pe

Various Bond Questions

A 6-year, $1,000 face value bond issued by Taylor Tools pays interest semiannually on February 1 and August 1. Assume today is October 1. What will the difference, if any, be between this bond's clean and dirty prices today? Question 1 options: 1) five month's interest 2) two month's interest 3) no difference 4) one

Entries for Bond Transactions-Effective-Interest

Celine Dion Company issued $600,000 of 10% 20-year bonds on January 1, 2008, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (a) The issuance of the bonds. (b) The

Cost of Equity and Appropriate Discount Factor

Please view attached file for clarity of the table. Question: What is the project's cost of equity? What is the appropriate discount factor to use for evaluating the refrigerator project? The following assumptions are used to determine the cost of capital. Historically, the company tried to maintain a debt to equity ratio

Bond prices and maturity time

Bond X is a premium bond making annual payments. The bond pays an 8 percent coupon, has a YTM of 6 percent, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond pays a 6 percent coupon, has a YTM of 8 percent, and also has 13 years to maturity. If interest rates remain unchanged, what do

Current bond price, YTM, coupon rate, real rate of interest

Staind, Inc. has 7.5 percent coupons and bonds on the market that have 10 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 8.75 percent, what is the current bond price? Ackerman Co. has 9 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If

Stock and Bond Transactions

See attached file for clarity of the tables included. Please provide step-by-step solutions. Problem One: The following transactions occurred during the year. Indicate how each transaction affected the number of shares outstanding, the balances in Common Stock and Additional-Paid-in Capital. Assume a beginning balance of

Yield of a Bond that Trades at a Discount

Fin 534 Chapter 8 Problem 9 Explain why the yield of a bond that trades at a discount exceeds the bond's coupon rate? Chapter 8 Problem 24 Assume there are four default-free bonds with the following prices and future cash flows:

Corporate finance

Brigit Hall has decided to establish a university endowment fund at T.T. Penguin's former university, using an $8 million donation from Penguin. The fund will be used to construct a new building in five years, which is expected to cost $10 million at that time. In the interim, Penguin would like to generate end-of-year scholarsh

Effects of borrowing by Treasury

Suppose that, due to an unexpected decline in federal income tax collections, the Treasury is compelled to borrow an extra $40 billion to cover planned expenditures in the current government budget. What would be some of the possible effects of this additional borrowing on the financial markets and the economy?

Yield to Maturity and Risk Free Rate

See the attachment. Problem One: (a). The yield to maturity on ACL bonds maturing in 2008 is 8.75 percent. The yield to maturity on a similar maturity U.S. Government Treasury bond in 7.06 percent and the yield on Treasury bills is 6.51 percent. What is the default risk premium on the ACL bond? (b) AKA is considering expan

Bonds: current market price, current yield, YTM, when will it be called

1. Determine the current market prices of the following $1,000 bonds if the comparable rate is 10% and answer the following questions. XY 5.25%, (interest paid annually) for 20 years. AB 14 %, (interest paid annually) for 20 years. a. Which bond has a current yield that exceeds the yield to maturity? b. Which bond m